Situation | Scenario Planning allows executives to explore and prepare for several alternative futures. It examines the outcomes a company might expect under a variety of operating strategies and economic conditions. Contingency Planning assesses what effect sudden market changes or business disruptions might have on a company and devises strategies to deal with them. Scenario and contingency plans avoid the dangers of simplistic, one-dimensional or linear thinking. By raising and testing various “what-if” scenarios, managers can brainstorm together and challenge their assumptions in a non-threatening, hypothetical environment before they decide on a certain course of action. Scenario and Contingency Planning allows management to pressure-test plans and forecasts, and equips the company to handle the unexpected.
Situation | Key steps in a Scenario and Contingency Planning process are:
1. Choose a time frame to explore;
2. Identify the current assumptions and thought processes of key decision makers;
3. Create varied, yet plausible, scenarios;
4. Test the impact of key variables in each scenario;
5. Develop action plans based on either the most promising solutions or the most desirable outcome the company seeks;
6. Monitor events as they unfold to test the company’s strategic direction;
7. Be prepared to change course if necessary.
Situation | By using Scenario and Contingency Planning, a company can:
• Achieve a higher degree of organizational learning
• Raise and challenge both implicit and widely held beliefs and assumptions about the business and its strategic direction
• Identify key levers that can inﬂ uence the company’s future course
• Turn long-range planning into a vital, shared experience
• Develop a clearer view of the future
• Incorporate globalization and change management into strategic analysis